Focus On

Natural Resources Law - Agriculture - Farms - income programs - Price supports and guarantees

Thursday, August 18, 2016 @ 8:00 PM  

Appeal by Ferme Vi-Ber inc. and others from a judgment of the Quebec Court of Appeal setting aside a decision granting their action against La Financière agricole du Québec (La Financière). The Court was called upon to identify the rules governing the interpretation of the rights and obligations of the parties to the Programme d’assurance stabilisation des revenus agricoles (ASRA Program), administered by La Financière. The appellants were Quebec farm producers that voluntarily participated in the ASRA Program. Under that program, La Financière undertook, in return for contributions from producers, to protect them from the income fluctuations associated with the agricultural market. The appellants contested certain decisions made by La Financière in determining their compensation payments for 2007. Those decisions were related to the calculation method chosen by La Financière in determining the compensation payable under the program, which aimed to protect participants from having their income drop below a predetermined percentage of the average income of a skilled worker. La Financière took account of additional income received as farm financial assistance from the federal government (linkage) based on the amounts the average benchmark farm would have received, as opposed to the amounts each ASRA Program participant actually received from the government. The appellants argued that the ASRA Program was a contract of insurance and that La Financière had improperly incorporated that additional income into its calculations so as to reduce their compensation under the program, in violation of the terms of the contract, which had to be interpreted on the basis of their reasonable expectations as insured persons. The producers applied to the Superior Court, which allowed their action, characterizing the ASRA Program as a contract of insurance and ordering La Financière to pay them substantial additional compensation for 2007. The Court of Appeal set aside that judgment, finding that the ASRA Program was not a contract of insurance and that the impugned decisions were reasonable. The appellants asked the court to declare that La Financière had to, under the ASRA Program, deduct any amounts to which each participant was entitled under a federal program on an individual basis.

HELD: Appeal dismissed. The ASRA Program was by nature a contractual mechanism rather than a social insurance program governed by public law. The courts had been right in the past to apply the rules of contract law to the ASRA Program, including those relating to defects of consent and to the scope of the obligations of the program’s participants. Contract law nonetheless applied to make La Financière accountable for the financial impact of its decisions if they failed to satisfy the requirements of good faith and contractual fairness. Since the ASRA Program was not a contract of insurance, it followed that the rule of interpretation based on the reasonable expectations of the insured did not apply. In Quebec law, the reasonable expectations rule applied solely in its minimum dimension, i.e. only where there was ambiguity. Because the ASRA Program was an innominate administrative contract that did not have the characteristics of a contract of insurance, the rules of contractual interpretation set out in arts. 1425 to 1432 C.C.Q. had to be applied to determine the outcome of the appeal. La Financière was under no statutory or contractual obligation to take account of the amounts individually received in this case. Under s. 88(3) of the ASRA Program, La Financière had a discretion in respect of the choice of linkage method. Neither the contract as a whole nor past practices supported a conclusion that one or the other of the two linkage methods had to be employed. La Financière exercised its contractual powers in accordance with the requirements of good faith and contractual fairness. That being so, it was open to La Financière in fixing the compensation payable to the appellants to choose to link the amounts they had received under the two federal financial assistance programs collectively.